A new national survey finds families are overwhelmed and saving less for college than they were two years ago.
Sallie Mae’s most recent “How America Saves for College” survey, released today, shows half of American families with children younger than 18 reported in 2012 that they were saving for college, compared with 60 percent in 2010. Researchers note the decline is likely a response to a protracted, weak economy and other priorities. “Families are focusing on ‘rainy day’ savings, general nondedicated savings, and retirement rather than college-specific savings,” the report says.
When parents were asked why they aren’t saving for college, responses varied. Top answers: Parents assume that financial aid will cover the cost of college; they think children are too young or too old to be saving; families are uncertain about which savings option to use; and others are merely procrastinating or feel it is up to the student to pay for college.
Nearly two-thirds of parents surveyed say they don’t have a plan yet are optimistic about their ability to save in the future, with many anticipating bumping up savings in the next five years.
While adults recognize the value of college, many report being in denial about college savings and feeling overwhelmed, annoyed, frustrated, and scared, according to the survey conducted in August of 1,600 parents online and sponsored by Sallie Mae, the financial-services company specializing in education, and Ipsos, an independent market-research company.
About 27 percent of parents who are saving for college use a 529 plan, a tax-advantaged savings plan for education, while about 42 percent are using other vehicles.
The amount that families are socking away does not square with the reality of college costs today. Parents with college-savings goals, on average, are aiming to save about $39,000 for each child. And the Sallie Mae analysis estimates that there is a gap between expected and actual savings, with most parents saving just $19,784 per child by the time their children turn 18.
Yet the College Board’s latest figures show the average cost of tuition and room and board at public state universities for in-state students are about $17,860 a year and $39,518 at private, nonprofit colleges.
Parents anticipate college costs will be paid by scholarships, grants, student contributions,
and borrowing. “Although the overestimation on financial-aid resources, and resulting underestimation of personal contributions and borrowing—particularly by the student—is slight, it is concerning as saving is less equivocal than is planning for scholarship and grant aid,” the report says.
The report, “How America Saves for College,” is the third in a series of surveys Sallie Mae has conducted on the topic since 2009.